South Korea seeks financing for record arms export to Poland

The Republic of Korea (South Korea) is actively considering financing options with leading commercial banks to facilitate the export of approximately 30 trillion won ($23 billion) worth of weapons to Poland.

Officials revealed that negotiations with major financial institutions are underway to address hurdles faced by local defence firms seeking to secure additional contracts with Poland, Defence Blog reports.

Last year, South Korean companies achieved a milestone with major defence deals totalling 17 trillion won, marking the country’s largest-ever arms deal. The agreement included the supply of K2 tanks, K9 self-propelled howitzers, FA-50 light attack aircraft, and Chunmoo multiple rocket launchers to Poland.

However, efforts to finalize additional contracts this year have encountered challenges, as the state-run Export-Import Bank of Korea (Eximbank) reached its upper limit for loans and guarantees after last year’s mega deals. A bill advocating for an increase in Eximbank’s equity capital and maximum legal cap on loans and guarantees is currently awaiting parliamentary approval.

In response to the urgency of supporting what could be South Korea’s largest-ever arms exports, the Ministry of National Defense convened a working-level meeting with high-ranking officials from five major commercial banks: KB Kookmin, Shinhan, Hana, Woori, and Nonghyup. The discussions centred on exploring financial measures to propel defence exports, with a specific focus on overcoming the current financial constraints.

“The government and local companies have been consulting measures to support arms exports to Poland,” stated a ministry official, refraining from disclosing further details due to the ongoing nature of the discussions.

Among the potential solutions being considered is a syndicated loan offered by commercial banks to fund comprehensive agreements with the Polish government. Sources familiar with the matter suggest that this financing model could be instrumental in addressing the financial requirements of large-scale defence projects.

This initiative aligns with South Korea’s broader ambition of capitalizing on its robust weapons exports to Poland, aiming to ascend to the position of the world’s fourth-largest arms exporter by 2027, a significant climb from eighth place in 2021.